New designation means less incentives for industry

Once a year, county leaders across North Carolina cross their fingers and hope for a weaker economy.

Or at least they hope the state will count them among the more economically troubled communities.

The biggest reason: tax credits — and the sliding scale that determines how much employers stand to gain for bringing jobs and buildings to different areas.

Cleveland County was upgraded to what the state considers a stronger economic position. In the game of industry recruitment, however, that can be a step backward.

"This is one of those situations where your success caught up with you," said Cleveland County Chamber President Michael Chrisawn. "Tier 1 does give you advantages, no doubt about it."

Chrisawn said the Tier 1 status had "an impact on virtually all of the projects" Cleveland County nabbed in 2012. Those successes led to securing more than 800 new jobs and nearly $1 billion in capital investment.

‘You want to be a 1’

The system behind the counter-intuitive economic thinking is North Carolina’s “tier designations.”

They basically say the frailer a county’s economic situation is deemed to be, the more money it stands to offer new and expanding companies considering job creation and investment.

The N.C. Chamber of Commerce assigns each county a level.

Tier 1 counties are the most economically distressed, while those on tier 3 are the least distressed.

The 40 worst-off counties can offer the most tax credits per job, $12,500 per position, with the least requirements.

Corporations who relocate or hire in those tier-1 communities only have to create five jobs to qualify. They also get the largest credit available, 7 percent, for buying property.

And employers who opt for the most-distressed, tier-1 counties are exempt from meeting the “wage test” that requires them to pay above average county salaries to get the tax breaks.

That’s one way in which local leaders expect the 2013 rankings to help Gaston compete with Cleveland County for jobs.

Cleveland went from a tier-1 to a tier-2 county — from the worst to the middle category, where Gaston has long stayed.

“(Cleveland County) had no wage test,” said Donny Hicks, executive director of the Gaston County Economic Development Commission . “They could pay minimum wage and still get the tax credits.”

Chrisawn said the change in designation could lead to Cleveland County being more choosy in the projects it vies for.

"I think we're going to have to be that much sharper in the way we do business," he said. "It may be a situation where we ask, 'Do we want to spend our resources and capital on this project or this project?' We might not be able to swing both of them, so to speak."

If the county was still Tier 1, he said, Cleveland County might be able to make a strong push for both projects.

Lincoln: Hope this will help

As counties get more economically viable, the tax-break enticements get smaller. A tier-2 county such as Cleveland and Gaston can offer breaks of $5,000 in credits per job. It has a 5-percent credit for property purchases, so long as that purchase is more than $1 million.

The amounts get smaller still for counties deemed to have the strongest economies.

That’s the situation with which Lincoln County dealt in 2012, when it was awarded a tier-3, or least economically distressed, ranking.

For 2013, Lincoln returns to the midpoint, or tier-2 standing.

“Some projects won’t even consider a tier-3 county,” said Crystal Gettys, interim director and business development manager for the Lincoln Economic Development Association.

“Hopefully this will definitely help us spark more interest in Lincoln County.”

Rankings gain weight

As time passes, those 1-to-3 rankings have taken on more importance in the state money game, says Hicks.

Say your county has one of the soundest economies, as judged by the state. When a company gets a Job Development Investment Grant, one of North Carolina’s largest, that company then has to put part of that money into a utility fund. The utility fund money goes toward economic development efforts in lower-ranked counties.

Even money for pet spaying and neutering can hinge on the tier designation, Hicks points out. Lower ranked communities can get taxpayer dollars to pay for those programs.

“I think sometimes the effect of those (rankings) is felt even more in other ways than in the tax credits,” Hicks said.